BOLIVIA: Diplomatic Clashes with US Worry Business

LA PAZ, Dec 22 2008 (IPS) - The United States’s decision to suspend tariff benefits for Bolivian imports as a result of the confrontation with the government of Evo Morales has generated widespread uncertainty among the business and working communities of the Bolivian capital’s satellite city of El Alto. The Morales administration expelled U.S. ambassador Philip Goldberg in September – declaring him "persona non grata" and accusing him of aiding the opposition in their violent attacks on government supporters – and then suspended the activities of the U.S. Drug Enforcement Administration (DEA) in November, showing the government’s determination to move forward in what it defines as a cultural and democratic revolution.

The George W. Bush administration responded immediately by ordering the indefinite suspension of the benefits granted under the Andean Trade Promotion and Drug Eradication Act (ATPDEA) for Bolivian imports, a decision which came into force on Dec. 15.

Alleging that Bolivia is failing to make adequate progress in the fight against drugs, Washington has thrown into question Bolivia’s future imports to the U.S., which could mean a loss of 250 million dollars in sales for Bolivia and put some 20,000 industrial workers out of a job.

In El Alto, where poverty is becoming more and more acute, the differences between the two governments "will have greater economic and social consequences and could have political repercussions in the medium-term," Bolivian National Chamber of Exporters (CANEB) director José Ribero told IPS.

According to a La Paz Chamber of Exporters (CAMEX) report entitled "Bolivia & the USA", approximately 70 percent of Bolivia’s cotton and fine-wool textile products exported to the U.S. are produced in El Alto, essentially a vast working-class suburb of La Paz that is home to 800,000 people.

The population of El Alto is growing at an annual rate of five percent and more than 95,000 of the city’s inhabitants live in abject poverty. This is high compared to other Bolivian cities, such as Santa Cruz, located 900 km east of La Paz, which has less than half that number of people living in extreme poverty, as reported by sociology Professor Joaquín Saravia in his book "Ser potencia social o tener producción industrial", on the tension between social development and industrial production.

"Immigration (from rural areas), high levels of unemployment and poverty have combined to fuel social conflict; the rest comes from the social, cultural and intellectual profile of the new residents of El Alto," the researcher says.

In October 2003, indigenous residents and trade unions, backed by peasants from the surrounding highlands, staged a one-month uprising in El Alto that was dubbed "the gas war," as it was prompted by opposition to gas sales to the U.S. under unfavourable conditions for Bolivia.

The protests forced right-wing president Gonzalo Sánchez de Lozada to resign and flee the country, after a military and police crackdown left at least 60 protesters dead.

"We are at a crossroads, a defining moment due to the closing of the U.S. market to our textiles and the loss of competitiveness for Bolivian products," said Ribero.

As of Dec. 16, the U.S. has set a 17 percent tariff on Bolivian imports. In response, the Morales administration has offered eight million dollars in long-term soft loans to facilitate the continuation of trade operations.

La Paz exporters want to maintain the U.S. market, instead of searching for alternative markets to replace it, Fernando López, head of CAMEX, told IPS.

Venezuela is not a large market and it cannot take the place of the U.S., López said in reference to Venezuelan president Hugo Chávez’s offer to increase that country’s imports from Bolivia to ease the impact of Washington’s sanctions.

Alluding to the calm response by government officials and their declarations that new buyers would be found, he said "It’s not that simple, because the U.S. is a unique market; it’s the largest market in the world in terms of population and per capita income."

The target market for Bolivian cotton products in the U.S. are middle-class consumers, while the more affluent buyers prefer European products and even domestically manufactured products, and lower income sectors purchase Chinese, Indian and Pakistani-made garments, said López.

But last week, the Southern Common Market (Mercosur) trade bloc – made up of Argentina, Brazil, Paraguay and Uruguay, with Venezuela in the process of joining – decided to import 30 million dollars in Bolivian textiles and other products duty-free, to help Bolivia absorb the blow.

President Morales sees the withdrawal of the ATPDEA benefits as a political reprisal for Bolivia’s expulsion of Ambassador Goldberg and the DEA, and he is hopeful that once President-elect Barack Obama takes office on Jan. 20, 2009, bilateral relations between the two countries will improve.

The Bolivian government says it is delivering results in the fight against drug trafficking, and cites a report by the United Nations Office on Drugs and Crime (UNODC), which found that Bolivia made good progress in 2008.

According to official figures, 5,500 hectares of coca crops have been eliminated, and 28 tons of cocaine and 1,112 tons of marijuana have been seized from drug traffickers, along with 2.5 million dollars in cash.

Ribero said the blow for exporters would be enormous, and López fears there will be a loss of quality jobs, because the standards in labour conditions set by buyers meant that workers could access social security, health insurance and technical training.

A sure market for exports enabled employers to pay workers between 214 and 285 dollars a month, which according to López are good wages for Bolivia’s industrial sector. He also said that this was an important factor in terms of securing decent, stable jobs for workers, in addition to opportunities for development.

While López called for "a clear government policy for the productive sector," Ribero expressed concern that Bolivia’s diplomatic problems with the U.S. have taken centre stage, although he is optimistic that the leftist government and the business sector will be able to reach agreement on a trade agenda.